Adding a 'public option' into the workers' comp market actually made the market more crowded and drove prices up.
SSRN · March 17, 2026 · 6345778
The Takeaway
Public options are often proposed as a way to lower consumer costs and increase competition against private insurers. This study of the 1990s insurance market found the opposite: the state-run entities became dominant, charged more than private firms, and concentration increased.
From the abstract
I exploit the formation in the 1990s of state entities that provide health and disability insurance for work-related injuries and illnesses (workers' compensation) in competition with the private market. We can think of these entities as "public options," similar to those discussed in health care. By investigating the effects of these formations on insurer competition and underwriting performance, I offer insight on the debate about the merits of public options. I find that the introduction of p